The latest Household Affordability Index by the Pietermaritzburg Economic Justice & Dignity group (PMBEJD) paints a bleak financial picture for South African households, where rising food, petrol and electricity prices threaten to leave millions destitute.
According to the group, millions of households in South Africa face an “intolerably difficult” time ahead, as the cost of living keeps rising, and prices in key categories rise far above headline inflation.
This is especially noticeable in food prices, which makes up the biggest expense in most household budgets.
The PMBEJD noted that even when looking at food prices broadly, costs are rising far above headline inflation – 2.9% in March – and this only gets worse when looking at key food items for specific groups, like the poorest households.
- For South Africa in general – Statistics South Africa’s Consumer Price Index in February 2021 shows that inflation on Food & Non-alcoholic beverages is 5.2%
- In urban areas – the National Agricultural Marketing Council’s Food Price Monitor shows that inflation on their basic urban food basket is 9.8%
- For poor households – PMBEJD data off from Pietermaritzburg Household Affordability Index, annualised for March 2021, shows that inflation on Household Food Basket is 12.6%
All households will also be hit by a 15%-plus increase in electricity prices, and as much as R1.00 per litre in fuel prices – from April.
While these costs are rising far above inflation, growth in wages and government grants are much lower, by comparison.
- Child grant – annual increase which will come into effect in April is 2.2% or R10 per month;
- Pensioners will get a 1.6% increase or R30 per month;
- National Minimum Wage was increased by 4.5% – or 93 cents per hour;
- Take home pay in South Africa has increased by 1.4% in nominal terms (0.1% in real terms);
“This has meant that families are not able to afford this year, what they were able to afford last year because increases on wages and grants are lower than the increases on basic goods and services,” the PMBEJD said.
With the maximum minimum wage in March 2021 at just over R3,800, none of the prioritised food baskets tracked by the group in major areas across the country are affordable.
The group said that South Africans are now worse off than they were before March 2020, while the majority will be poorer in 2021 than they were last year, a time when the country was in the middle of the Covid-19 pandemic.
“Jobs continue to be lost. People have less savings, and less money. Food is being taken out of children’s mouths. The prices of essential goods and services continue to rise…It is unlikely that this status quo will change and so we expect that the affordability crisis in households will deteriorate further,” it said.
“When all our money is going to electricity, transport, and food; we must expect our economy to decline further.”
What can be done
The PMBEJD said that the Reserve Bank needs to intervene on food pricing, and fulfil its mandate to keep inflation within the 3% to 6%.
Headline inflation dipped below the range, to 2.9% in March, but this was driven by big purchases – like appliances and the like – which are not typical repeat expenses. This gives the impression that inflation is low across the board, but in reality core purchases like food are rising rapidly.
Headline inflation is used by many companies and bargaining councils as the starting point in wage negotiations.
“This mandate appears to kick in sharply when wage levels are being negotiated. In these instances, the Reserve Bank calls out ‘unreasonable’ wage demands. The Reserve Bank however seems not to display this level of passion and consistency in intervening to keep the level of inflation on essential goods and services for low-income households down,” it said.
For example, the group said that there appears to be no intervention from the Reserve Bank when Eskom decides to increase electricity tariffs by 15.63%, or when food prices rocket to above 10%, or when public transport taxi fares increase by 7% or even the 25% seen in Gauteng last year.
It said that if core goods and services are rising far above inflation, while low headline inflation is used an excuse by employers to keep wage increases low, it’s local workers who carry the burden and end up subsidising higher income earners and employers.
Failure to rectify the situation could lead to civil unrest, the group said.
“The triggers, we have long predicted – where material conditions just become too intolerable and where one person, two people, three people start to say, ‘we cannot and will not continue to live under such conditions’ – will start multiplying.
“The public mood seems to us to be shifting rapidly. It seems to us that much of our future rests in the decisions that will be taken by hungry men and women,” it said.